Smith v. Bertram
Decision Date | 22 December 1999 |
Docket Number | No. 97-1772.,97-1772. |
Citation | 603 N.W.2d 568 |
Parties | Donna J. SMITH, Shirley M. Wormley, and Carol S. Fensterman, Trustees Under The Eunice P. Lewis Trust, Appellees, v. Steven E. BERTRAM and Marsha L. Bertram, Appellees, and Corey Development, Ltd., Appellant. |
Court | Iowa Supreme Court |
M. Wayne Oltrogge of Oltrogge Law Office, P.C., Clear Lake, for appellant Corey Development, Ltd.
Christopher D. Stombaugh of Kopp, McKichan, Geyer & Skemp, Platteville, Wisconsin, for appellees Steven and Marsha Bertram.
William C. Fuerste of Fuerste, Carew, Coyle, Juergens & Sudmeier, P.C., Dubuque, for appellees Donna J. Smith, Shirley M. Wormley, and Carol S. Fensterman.
Considered by LARSON, P.J., and CARTER, TERNUS, CADY, and HARRIS,1 JJ. CARTER, Justice.
Defendant, Corey Development Ltd. (Corey Development), an assignee of an option to purchase land, appeals from a declaratory judgment determining that its option rights had been extinguished as a result of subsequent transactions. The declaratory judgment action had been brought by Eunice P. Lewis, the owner of the land. The trustees of the Eunice P. Lewis trust have been substituted as plaintiffs following Eunice Lewis's death. The plaintiffs will be referred to herein as the Lewis interests.
Corey Development asserts that the district court was incorrect in finding that, when a contract contains both a fixed-price option and a right of first refusal of a third party's offer, an offer by a third party extinguishes the fixed-price option. It also contends that the district court erred in finding that the third-party offer was bona fide. We affirm the district court on both issues.
The Lewis interests commenced this action to determine the rights of the parties under a contract containing both a fixed-price option and a right of refusal on a third-party offer. Corey Development is an assignee of the rights of Louis and Michael Remakel, who contracted with the Lewis interests with respect to this land in 1992. The agreement in pertinent part contained two provisions: an option to purchase the real estate in question for $10,000 per acre (totaling $250,000), which would last for five years from the date of the agreement, and a right of first refusal with respect to any third-party offer of purchase received by the Lewis interests.
Appellees Marsha and Steven Bertram, who were named as defendants in the declaratory judgment action, are Lewis's granddaughter and grandson-in-law. In March 1996 they submitted a formal offer to buy the real estate in question for $30,000 per acre (totaling $750,000). This was accompanied by a $10,000 earnest money deposit. The Remakels, upon being notified of the Bertrams' offer, attempted to exercise their fixed-price option. This effort was rejected by the Lewis interests. In the alternative, the Remakels indicated that they would exercise their right of first refusal on the $30,000 per-acre offer without prejudice to litigating their rights under the fixed-price option.
The district court, in interpreting the agreement, admitted extrinsic evidence of the intention of the parties. Based upon testimony that (1) Lewis had insisted on the inclusion of a right of first refusal for the express purpose of allowing her to accept higher offers for the property than was provided in the fixed-price option and (2) the Remakels' attorneys, who prepared the option agreement, assured her that she could accept higher offers for the property subject to the Remakels' right of first refusal, the district court found that it was the intent of the parties that a third-party offer would extinguish the fixed-option price. Other relevant facts will be discussed in connection with the legal issues presented.
A declaratory judgment action is reviewed as any other judgment. Grinnell Mut. Reins. Co. v. State Farm Mut. Auto. Ins. Co., 558 N.W.2d 176, 178 (Iowa 1997). How the parties tried the case in the district court governs this court's scope of review. In re Mt. Pleasant Bank & Trust Co., 426 N.W.2d 126, 129 (Iowa 1988). The parties tried this action at law, and therefore, review is to correct errors at law. Iowa R.App.P. 4; Grinnell Mut. Reins. Co. v. Recker, 561 N.W.2d 63, 68 (Iowa 1997). The court is bound by the district court's findings of fact if those findings are supported by substantial evidence. Iowa R.App.P. 14(f)(1); Recker, 561 N.W.2d at 68. The court, however, is not bound by the district court's conclusions of law, and the court may inquire into whether the district court's ultimate conclusions were materially affected by improper conclusions of law. Recker, 561 N.W.2d at 68.
The written agreement at issue in this case provides:
This court was presented with a case in which the contract provided both a fixed-price option and a right to purchase at the price tendered by a third person in Imperial Refineries Corp. v. Morrissey, 254 Iowa 934, 119 N.W.2d 872 (1963). In that case, we did not determine the effect of the dual options for purposes of interpreting the agreement. We found that plaintiff had waived the right to exercise the fixed-price option through an unqualified offer to match a third-party offer. Imperial Refineries, 254 Iowa at 939-40, 119 N.W.2d at 875. That situation is in sharp contrast to the Remakels' careful efforts in the present case to preserve their rights under the fixed-price option.
888 F.2d 912 (1st Cir.1989) ( ); Texaco, Inc. v. Creel, 57 N.C.App. 611, 292 S.E.2d 130, 133-34 (1982) ( ); Crowley v. Texaco, Inc., 306 N.W.2d 871, 873-74 (S.D. 1981) (same).
69 N.Y.2d 769, 513 N.Y.S.2d 113, 505 N.E.2d 623 (1987) (same); Markert v. Williams, 874 S.W.2d 353, 357-58 (Tex.App.1994) ( ).
Given the uncertainty as to the intent of the Lewis Remakel agreement, we are satisfied that the district court properly considered extrinsic evidence of the parties' intent. The rule of interpretation set forth in the Restatement of Contracts provides:
A question of interpretation of an integrated agreement is to be determined by the trier of fact if it depends on the credibility of extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence.
Restatement (Second) of Contracts § 212(2), at 125 (1981). We have applied this rule in other interpretation issues coming before us. See Borgen v. Klemm, 391 N.W.2d 252, 256 (Iowa 1986)
; Farm Bureau Mut. Ins. Co. v. Sandbulte, 302 N.W.2d 104, 107-08 (Iowa 1981); Connie's Constr. Co., Inc. v. Fireman's Fund Ins. Co., 227 N.W.2d 207, 210 (Iowa 1975).
In interpreting the contract as it did, the...
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